eCommerce poses a variety of issues with order fulfilment and inventory control. It turns out that a quarter of online shoppers ditch their cart due to out-of-stock issues. This means eCommerce sites could be losing 25% of sales because of inventory control problems from stock-outs. However, this is only taking into account customers who have placed items in the cart and then left because something wasn’t in stock. There’s a significant amount of potential customers who shy away from the site once they encounter an out-of-stock page; they haven’t even put anything in their cart yet and they’ve left the site.
Let’s try to understand the series of events and feelings evoked by customers when they experience a stock-out and the greater implications for the company.
When a product is out of stock on your site, some customers may instantly switch stores and get the same product on a different eCommerce site. They might get frustrated that the brand isn’t available and disregard their brand loyalty altogether. In some instances, they might normally wear one brand of tennis shorts but go to a new brand if they are always out of their size online.
However, there are some people who remain loyal to the brand — they like the quality and know how the items fit. These customers generally respond to stock outs by substituting it with a different size or variety of the original product. Another reaction is that the customer just gets frustrated and doesn’t buy the item from any eCommerce retailer.
If you’ve pumped a lot of advertising into a certain product and customers look for it, only to find it’s out of stock, this can cause an array of emotions. They might feel let down or even tricked by your advertising.
The cost of stock-outs
When your inventory control can’t cope with demand, stock-outs come at a large cost. In this situation, there are financial costs which can hurt the bottom line of the company. Missed sales opportunities definitely have an impact on potential earnings.
However, the cost is far greater and sometimes harder to repair than just finances. This kind of cost comes in the form of reputation. Customers tend to be brand loyal for a reason. If your online platform fails to deliver on customer expectations, this can tarnish your brand and customer trust. Satisfaction declines and customers are less likely to think of your brand first when they are in need of something. Negative word-of-mouth can stain the reputation of a company. Interestingly, negative word-of-mouth has a stronger effect on customers probability of purchase than positive word-of-mouth. Customer’s opinions are very influential and they can steer people away from your brand.
So, what can you do?
There are a few things you could do to mitigate a stock-out situation:
- Recommend customers a similar product when the one they want is out of stock
- Build better relationships with your suppliers so you can expedite delivery in these situations
- Conduct regular stocktakes so you always know what you have in stock and can react proactively
- Set par levels so you can reorder stock in time
If you have a plan and you’re proactive with your customer interactions, you’ll have a better chance of avoiding the dark side of stock-outs.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.